Launch Hour Lease

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The equipment account is debited by the present value of the minimum lease payments and the lease liability account is the difference between the value of the equipment and cash paid at the beginning of the year. Depreciation expense must be recorded for the equipment that is leased.
The lessee records the leased right as an item of property, plant, and equipment, which is then depreciated over its useful life to the lessee. Short-term leases are known as operating leases. Rent is simply recorded as rent expense as incurred and the underlying asset is not reported on the books of the lessee.
Accounting: Lease considered an asset (leased asset) and liability (lease payments). Payments are shown on the balance sheet. Tax: As owner, lessee claims depreciation expense, and interest expense.
The leased equipment is not shown as an asset on the company's balance sheet. This is always viewed as a “true lease” by the IRS, and the company (the lessee) cannot take the tax benefits of ownership.
An equipment lease agreement is a contractual agreement where the lessor, who is the owner of the equipment, allows the lessee to use the equipment for a specified period in exchange for periodic payments. The subject of the lease may be vehicles, factory machines, or any other equipment.
The leased equipment is not shown as an asset on the company's balance sheet. This is always viewed as a “true lease” by the IRS, and the company (the lessee) cannot take the tax benefits of ownership.
Capital leases are classified under the “fixed assets” or “plant, property and equipment” heading in the assets section of a small or large company's balance sheet.
Assets being leased are not recorded on the company's balance sheet. They are expensed on the income statement. So, they affect both operating and net income. Other characteristics include: Ownership: Retained by lessor during and after the lease term.
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